Canadian GDP Revisions Re-Write Pandemic, All Sectors Recovered: BMO

Recent revisions to Canada's Gross Domestic Product (GDP) data suggest that the economic impact of the COVID-19 pandemic was less severe than previously thought. Statistics Canada updated its figures, indicating that the economy has been performing better than earlier estimates showed. These changes have led some experts, including Douglas Porter, Chief Economist at BMO, to describe the revisions as "re-writing" the pandemic's economic narrative.

GDP revisions are standard practice as more accurate data becomes available. However, the magnitude of these recent adjustments is notable. According to BMO, the latest data revisions have increased the reported economic output by 1.5% since the end of 2020. Given that the economy has grown by just over 7% since March 2020, this 1.5% adjustment represents a significant portion of that growth.

One of the most striking aspects of these revisions is the improved performance of sectors that were initially believed to be hardest hit by the pandemic. Industries such as air travel, hotels, and restaurants are now reported to be operating at or above pre-pandemic levels. This contrasts sharply with earlier data, which suggested these sectors were still struggling to recover.

Despite these optimistic revisions, some experts remain skeptical about how well the data reflects the actual economic situation. Porter notes that other indicators, such as elevated unemployment rates and the hollowing out of downtown cores, seem inconsistent with an economy performing at full capacity. This discrepancy raises questions about the accuracy of the revised GDP figures.

The implications of these revisions are significant. If the economy is indeed performing better than previously thought, it could influence government policy decisions, including those related to economic stimulus and interest rates. However, if the data does not accurately reflect on-the-ground realities, there is a risk of policy missteps.

In conclusion, while the revised GDP data paints a more positive picture of Canada's economic recovery from the pandemic, it is essential to approach these figures with caution. A comprehensive understanding of the economy requires considering multiple indicators beyond GDP to ensure that policy decisions are well-informed and effective.